The failure of Congress to approve emergency loans to General Motors and Chrysler pushed the North American auto industry and the national economy close to catastrophe, but the immediate crisis may be averted by presidential intervention, according to officials at CSM Worldwide, the Motor & Equipment Manufacturers Association (MEMA), the Original Equipment Suppliers Association (OESA) and the National Automobile Dealers Association (NADA).
The organizations are encouraged that President Bush is now open to using his power to avert a deeper crisis by supporting the release of funds already appropriated by Congress under the Troubled Asset Relief Program (TARP). President-elect Obama has a role to play too, explaining to the American people and our elected officials exactly what's at stake, they added.
"We are urging the White House to use funds from the TARP program immediately to prevent a collapse of America's auto industry," said NADA Chairman Annette Sykora. "The damage to the economy from a bankruptcy restructuring would be much higher than bridge loans. Our weakened economy can't withstand an automaker failure."
Another major fault line in the industry is the North American auto parts supply base. According to Craig Cather, president and CEO of CSM, the leading provider of global automotive forecasting and advisory services, an uncontrolled bankruptcy filing by General Motors, Chrysler or Ford would have an immediate impact on the financial stability of suppliers and every automaker operating in North America, including the Asian and European manufacturers, because they are mutually dependent on the same supply base.
An analysis by CSM shows that 58 percent of GM's North American suppliers also supply Asian automakers. Among Chrysler suppliers, 59 percent also supply Asian automakers. Among Ford suppliers, the figure is 65 percent.
"Many suppliers can't afford another major hit to their production and cash flow," said Cather. "If they are forced to reorganize or possibly even liquidate, that would start a ripple effect that would undermine every automaker in North America. Lenders, investors, employees and communities in every state and province will be hurt."
Neil DeKoker, president and CEO of the Original Equipment Suppliers Association (OESA) agreed: "Today's auto industry is interdependent and it is impossible to separate the economic stability of component suppliers from the auto manufacturers."
According to OESA and MEMA, motor vehicle parts suppliers are the nation's largest manufacturing sector and the largest manufacturing employer in seven states. In 2007, suppliers to the automotive industry directly employed 722,600 U.S. workers.
The inability of the automakers and the automotive supplier industry to get sufficient working capital from its traditional sources is severely and negatively impacting the entire sector," said Robert McKenna, president and CEO of MEMA. "We hope that the president will act quickly and decisively."
As of June 2008, employment in the U.S. supply base fell to 590,000 workers – a loss of 130,000 domestic manufacturing jobs in less than two years. Supporting supplier jobs protects employment throughout the United States.
According to NADA, dealers employ 1.1 million people nationwide. A bankruptcy by one of the Detroit automakers would force dealer closings, putting people out of work, increasing foreclosures, shuttering storefronts, idling real estate, and reducing state, county, and town tax revenues. NADA estimates that as many as 900 dealers will close their doors this year.
About CSM Worldwide
CSM Worldwide (www.csmauto.com) provides trusted automotive market forecasting services and strategic advisory solutions to the world's top automotive manufacturers, suppliers and financial organizations. CSM Worldwide covers the global automotive environment from offices in Detroit, Grand Rapids, Frankfurt, London, Paris, Shanghai, Tokyo, São Paulo, Budapest, Delhi, Bangkok and Seoul.
About MEMA
The Motor & Equipment Manufacturers Association supports its members through its three market segment associations, Automotive Aftermarket Suppliers Association (AASA), Heavy Duty Manufacturers Association (HDMA) and Original Equipment Suppliers Association (OESA). For more information on the motor vehicle parts supplier industry, please visit www.mema.org or www.automotivesupplier.org. Contact: Ann McCulloch, 202-312-9242 or 202-494-7988, amcculloch@mema.org.
About NADA
NADA, founded in 1917 and based in McLean, Va., represents about 20,000 new-car and -truck dealers with 43,000 franchises, both domestic and import. Contact: David Hyatt, Vice President, NADA Public Affairs, 703-821-7120, dhyatt@nada.org.
About OESA
Formed in August 1998, OESA provides a forum for automotive suppliers to address issues of common concern, serving as a resource for industry information and analysis, promoting the interests of the OE supplier community and serving as a voice and positive change agent for the industry. With over 400 member companies having global automotive sales exceeding $300 billion, OESA represents more than 65 percent of North American automotive supplier sales. Contact: Glenn Stevens, 248-952-6401, gstevens@oesa.org
